A major lease deal co-signed by longtime medical rivals Cedars-Sinai Medical Center and UCLA Health System last week might indicate that the health care real estate market is back on track after years of uncertainty.
Cedars-Sinai and UCLA, in partnership with Philadelphia health care company Select Medical Holdings Corp., signed a 15-year lease that will commence in 2015 for a Century City hospital building at 2070 Century Park East. The deal for the nine-story medical center, which has sat vacant for the past five years, was valued at about $80 million. The two L.A. health care giants plan to open a 138-bed rehabilitation hospital in the 170,000-square-foot facility.
Century City landlord Realtech Development, headed by founder David Wilstein, built the hospital and an adjacent 200,000-square-foot medical office building in 1971. Tenet Health Care Corp. of Dallas leased and operated the hospital for decades before closing in 2004. The building was operated as Century City Doctors Hospital for about three years after that, but closed in late 2008 when the physician group operating the facility filed for Chapter 7 liquidation bankruptcy.
John Wadsworth, a vice president for Colliers International and national director of the firm’s health care properties division, represented Realtech in the deal. He was hired in 2008 to lease the property, but said he had trouble finding a medical group willing to commit to the space during the recession, particularly as the details of the Affordable Care Act were being hammered out in Washington.
“It was a very uncertain time in the health care world,” he said.
Wadsworth said he only began to gain traction on a lease deal for the property after the U.S. Supreme Court upheld the ACA in June 2012 and, months later, the re-election of President Obama.
“After those two events, the health care world had a road map at least for the next four years,” he said. “It didn’t make everything better overnight, but at least health care providers could make decisions again and forecast a little bit better.”
Wilstein said his company committed to making a substantial investment in the property to upgrade facilities in order to make the deal happen, though he declined to disclose how much.
“Were it not for these generous allowances and concessions made by all involved in this deal, the transaction would not have happened,” he said.
At least a portion of the improvements Realtech promised to make include upgrades required by the state to make the hospital meet earthquake standards. Wadsworth said the 15-year lease for the property, which is somewhat short by health care industry standards, was made to coincide with the year the hospital might need to make additional seismic upgrades.
Health at Home
L.A. Care Health Plan, the local public agency created by the state to provide health care services for low-income people in Los Angeles County, including through programs such as Medi-Cal, has expanded its presence in downtown Los Angeles.
The health care provider, which has headquarters at 1055 W. Seventh St., signed a five-year, 47,300-square-foot lease at 1200 W. Seventh late last month that will begin in February.
The lease, technically a sublease from Charter Holdings, which has a master lease over the 713,000-square-foot building, is the second commitment L.A. Care made in the building in as many months. In October, the agency signed a sublease for about 52,000 square feet on the first and second floors of the nine-story building in what used to be offices for the now-defunct Community Redevelopment Agency of Los Angeles. The new deal brings its total footprint in the building to nearly 101,000 square feet. L.A. Care plans to use the most recently leased space for a call center, while space the agency leased earlier this fall will house offices.
Jason Warner, a senior vice president for Jones Lang LaSalle Inc., represented Charter in the deal. He said the Garland Center’s proximity to L.A. Care’s headquarters and its greater capacity for parking were what most appealed to the agency about the space.
“One of the drivers that brought them to our building was they had a huge expansion need for back office,” he said. “Plus, we have a much higher parking ratio at our building than they did across the street.”
Onno Zwaneveld, executive vice president of CBRE Group Inc., represented L.A. Care in the deal.
Staff reporter Bethany Firnhaber can be reached at [email protected] or (323) 549-5225, ext. 235.
